The impact of informal care from children to their elderly parents on self-employment? Evidence from China

China is facing a demographic shift that the proportion of elderly is growing, and providing informal care to elderly people is important in explaining “labor market discrimination”, where reducing willingness to be self-employed is the core. Although earlier studies examined the informal care and labor participation nexus, few analyzed the effects of informal care on self-employment from perspective of opportunity cost and inter-generational support simultaneously. We first develop a theoretical model, predicting that informal care can bring both cost effect and support effect on self-employment. The predictions are then confirmed using dataset collected from Chinese General Social Survey. Particularly, the inhibition of informal care is more pronounced in the group that are women, having a working spouse, living in rural area and having young children. Thus, China needs to take additional steps to overcome the barriers keeping the elderly from enjoying pension assistance.